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BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED JUNE 30, 2018
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP FINANCIAL STATEMENTS TABLE OF CONTENTS FOR THE YEAR ENDED JUNE 30, 2018
Page
INDEPENDENT AUDITOR’S REPORT ........................................................................................... 1-2
MANAGEMENT’S DISCUSSION AND ANALYSIS ....................................................................... 3-8
FINANCIAL STATEMENTS STATEMENT OF NET POSITION ........................................................................................................ 9 STATEMENT OF ACTIVITIES .......................................................................................................... 10
FUND FINANCIAL STATEMENTS BALANCE SHEET ............................................................................................................................... 11 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE ......... 12
NOTES TO THE FINANCIAL STATEMENTS ........................................................................... 13-29
REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE FOR THE GENERAL FUND…………………………...30 SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY…...……….31 SCHEDULE OF PENSION CONTRIBUTIONS…………………………………………………………32 SCHEDULE OF THE PROPORTIONATE SHARE OF THE OPEB LIABILITY……………….…….33 SCHEDULE OF OPEB CONTRIBUTIONS………………………….…………….……………………34 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION…….…………………………………35
OTHER SUPPLEMENTARY INFORMATION BALANCE SHEET – NONMAJOR FUNDS ......................................................................................... 36 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – NONMAJOR FUNDS ............................................................................................................................. 37
INFORMATION REQUIRED BY GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING
STANDARDS....................................................................................................................................... 38-39
.,.~ Shelton CPAs, LLP INDEPENDENT AUDITOR'S REPORT
To the Bureau Members Bowling Green Area Convention & Vi sitors Bureau Group Bowling Green, Kentucky
Report on the Financial Statements
www.sheltoncpas.com
We have audited the accompanying financial statements of the governmental ac tivities, the general fund, each major fund and the aggregate remaining fund information of Bowling Green Area Con ven tion & Visitors Bureau Group (the "Bureau Group") as of and for the year ended June 30, 2018 , and the related notes to the financial statements, which collectively compri se the Bureau Group' s bas ic financi al statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from materi al misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards app licable to fin ancial audits contained in Go vernment Auditing Standards, issued by the Comptroller General of the United States . Those standards require that we pl an and perform the audit to obtain reasonable assurance about whether the financial statements are free from materi al mi ss tatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements . The procedures selected depend on the auditor's judgment, including the assessment of the risks of material miss tatement of the financial statements, whether due to fraud or error. In making those ri sk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respec ts, the respective fin ancial position of the governmental activities, the general fund, each major fund, and the aggregate remaining fund information of the Bureau Group, as of June 30, 201 8, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
181 West Professional Park Ct. Bowling Green, KY 42104 (270) 842-9620 Fax (270)781-1911 [email protected]
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management' s discussion and analysis, budgetary comparison information, schedule of proportionate share of net pension liability, schedule of pension contributions, schedule of proportionate share of the OPEB liability, and schedule of OPEB contributions on pages 3-8 and 30-34 be presented to supplement the basic financial statements. Such information, although not a part of the basic fin ancial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Bureau Group's basic financial statements. The combining nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements.
The combining nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2018, on our consideration of the Bureau Group's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Bureau Group's internal control over financial reporting and compliance.
~c_p At l--L-p Shelton CPAs, LLP Bowling Green, KY 42104 November 7, 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Management’s Discussion & Analysis 2018
As management of the Bowling Green Area Convention & Visitors Bureau (BGACVB, CVB or Bureau Group), readers of BGACVB’s financial statements are offered this narrative overview and analysis of the financial activities of BGACVB for the fiscal year ending June 30, 2018. Management’s Discussion & Analysis is intended to explain the significant changes in financial position, as well as differences between the current and prior year. This information is presented in conjunction with the audited financial statements that follow this section. The mission of the Bowling Green Area Convention & Visitors Bureau is to promote tourist and convention activity as directed by KRS 91A.350-.394.
Financial Highlights In prior years, the CVB has raised its budget each year and been fortunate to meet or exceed this budget in most years.
o Net change in fund balance for the Bureau Group decreased by $30,710 in 2018 as compared to an increase of $292,028 in 2017.
o Installing a new Tourism Attraction Wayfinding System (93 signs) throughout the
community was a significant expense at a total cost of $216,690.
o There was one applicant to the Special Tourism Projects Fund totaling $150,000 in FY2018 as compared to one application in FY2017 for $150,000.
o According to Smith Travel Research the Warren County hotel sector saw a decrease in
occupancy during FY2018 due primarily to non-tourism major construction and other projects taking place at local manufacturing and other local businesses completing early in the fiscal year.
o The net pension and OPEB liability currently comprises 86% of the CVB’s total liabilities.
Overview of the Financial Statements These financial statements are designed to provide a broad overview of the BGACVB’s finances. The statement of net position presents governmental activities on the BGACVB’s assets and liabilities, with the difference being net position. Over time, increases and decreases in net position may serve as a useful indicator in the financial position of the BGACVB relating to financial improvement, investments in new tourism development or a decline in the tourism industry. The statement of activities presents governmental activities showing how the BGACVB’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods.
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Governmental-wide financial statements. The statement of net position and the statement of activities display information about the primary government (BGACVB). Governmental activities generally are financed through taxes, intergovernmental revenues and other non-exchange transactions. The government-wide financial statements can be found on pages 9 and 10 of this report. Fund financial statements. A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The BGACVB uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 13-29 of this report.
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Condensed Financial Information
Governmental Activities
Table 1
Fiscal Year
Ending 2018
Fiscal Year
Ending 2017 Dollar Change
Percent
Change
CURRENT ASSETS 2,459,193$ 2,495,339$ (36,146)$ -1.45%
CAPITAL ASSETS 173,592 175,935 (2,343) -1.33%
TOTAL ASSETS 2,632,785 2,671,274 (38,489) -1.44%
DEFERRED OUTFLOWS OF RESOURCES 391,133 159,930 231,203 144.57%
TOTAL ASSETS AND DEFERRED OUTFLOWS 3,023,918 2,831,204 192,714 6.81%
TOTAL CURRENT LIABILITIES 194,380 199,816 (5,436) -2.72%
TOTAL LONG TERM LIABILITIES 1,218,866 995,634 223,232 22.42%
TOTAL LIABILITIES 1,413,246 1,195,450 217,796 18.22%
DEFERRED INFLOWS OF RESOURCES 99,976 - 99,976 0.00%
NET POSITION
Invested in capital assets 173,592 175,935 (2,343) -1.33%
Restricted 1,476,348 1,254,657 221,691 17.67%
Unrestricted (139,244) 205,162 (344,406) -167.87%
TOTAL NET POSITION 1,510,696 1,635,754 (125,058) -7.65%
TOTAL LIABILITIES, DEFERRED INFLOWS
OF RESOURCES AND NET POSITION 3,023,918$ 2,831,204$ 192,714$ 6.81%
The total net position of the Bureau Group for FY2018 was $1,510,696, a $125,058 decrease from fiscal year ending 2017. The $223,232 increase in pension and OPEB liabilities makes up the change in net position. Net Pension and OPEB Liability is the BGACVB's proportionate share that must be carried as a liability. The Restricted Funds are made up of Special Tourism Projects along with net pension and OPEB liabilities. Special Tourism Projects was created to fund nonprofit tourism related projects in Bowling Green and Warren County that are projected to increase overnight stays in Bowling Green and Warren County hotels, motels and related facilities. During FY18, there was one application for funding totaling $150,000, in FY2017 there was one application for funding totaling $150,000, and in FY2016 there was one application totaling $81,635. The Special Tourism Projects Fund is currently generating approximately $150,000 annually.
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Condensed Financial Information
Governmental Activities
Table 2
Fiscal Year
Ending 2018
Fiscal Year
Ending 2017 Dollar Change
Percent
Change
REVENUES
Room tax 3,397,683$ 3,501,477$ (103,794)$ -2.96%
Matching funds 92,603 93,224 (621) -0.67%
Advertising sales 33,477 39,272 (5,795) -14.76%
Merchandise sales 27,908 18,128 9,780 53.95%
Interest income 12,106 6,631 5,475 82.57%
Sponsorship - 666 (666) -100.00%
TOTAL REVENUES 3,563,777 3,659,398 (95,621) -2.61%
EXPENDITURES
Projects and events 1,948,252 1,966,808 (18,556) -0.94%
Advertising and other promotions 862,829 601,111 261,718 43.54%
Administration and other 783,406 799,451 (16,045) -2.01%
TOTAL EXPENDITURES 3,594,487 3,367,370 227,117 6.74%
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES (30,710) 292,028 (322,738) -110.52%
FUND BALANCE JULY 1 2,295,523 2,003,495 292,028 14.58%
FUND BALANCE JUNE 30 2,264,813 2,295,523 (30,710) -1.34%
NET CHANGE IN FUND BALANCE (30,710) 292,028 (322,738) -110.52%
Depreciation expense (2,343) (5,316) 2,973 -55.93%
Pension & OPEB expenses not reported in
governmental funds (92,005) (103,387) 11,382 -11.01%
NET CHANGE IN NET POSITION (125,058)$ 183,325$ (308,383)$ -168.22%
In fiscal year ending 2018, BGACVB total revenues decreased 2.61% with total room tax revenue decreasing by 2.96%. Hotel industry experts had forecast occupancy to continue to soften during FY2018. While the tourism sector for Bowling Green hotels continued to be strong largely due to more events and increases in attendance at automotive events and athletic tournaments, other non-tourism sectors of hotel occupancy declined significantly throughout the period due to the wrap up of major construction and other projects taking place at local manufacturing and other businesses early in the fiscal year.
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According to Smith Travel Research, hotel occupancy declined and average daily rate was up slightly in FY2018 over FY2017. Even with the decline in occupancy, Warren County continues to be near the top compared to other comparable cities in occupancy and average daily rate. No new hotels opened in Warren County during FY2018 though two were under construction and two were in the pipeline. It appears that Airbnb and other home sharing websites are negatively affecting hotel occupancy in Warren County and this affects hotel room tax revenue due to very few Airbnb’s collecting and remitting local transient room taxes. Advertising and other promotions increased during the year primarily due to the fabrication and installation of a tourism wayfinding signage system of 93 signs directing visitors to 25 attractions and venues throughout the community. Other areas of increase were the addition of one new Interstate 65 billboard, attending several additional marketplaces to develop new group business leads and further expanding our public relations presence on a national level. In November 2004, the City of Bowling Green passed an ordinance stating that transient room tax from one hotel that had been designated to the Sloan Convention Center would now go to the BGACVB to be set up in a separate checking account called Special Tourism Projects. With recommendation from the BGACVB Board of Directors and approval from the Bowling Green City Commission and Warren County Fiscal Court, those dollars are to be used for non-profit tourism related projects in Bowling Green and Warren County that are projected to increase overnight stays at Bowling Green and Warren County hotels, motels and related facilities. On pages 15 and 17, more financial detail is provided on the Special Tourism Projects account. The project approved from the Special Tourism Projects Fund during the 2018 fiscal year: $150,000 Aviation Heritage Park – Phase I construction of a museum facility Project funded in fiscal year 2017: $150,000 Lost River Cave – construction of Flying Squirrel Zipline
$1,756,050 Total Special Tourism Projects funded for fiscal years 2006-2018 The BGACVB takes a conservative approach when budgeting revenues, especially for room tax because numerous factors that determine this revenue are beyond the CVB’s control (weather, terrorism, hotel rates, local business projects, national/world economy, gas prices, etc.). The CVB’s marketing, public relations and sales programs have continued to strengthen and staff have continued to receive annual pay raises. In June 2005, the Kentucky Department of Revenue began collecting a 1% statewide lodging tax to be deposited into the Tourism, Meeting and Convention Marketing Fund as authorized by KRS Chapter 142 for the sole purpose of marketing and promoting tourism in the Commonwealth. A portion of those funds are made available to local communities through the Tourism Marketing Incentive Program (formerly Tourism Matching Funds program). For fiscal year 2018, Warren County’s allotment was $92,603, down $619 from 2017.
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Only convention & visitors bureaus (and tourist commissions) are eligible to apply for these funds. In FY2015, BGACVB created a similar advertising matching funds program for Warren County non-profit attractions. In its first year, four attractions applied and received a total of $21,117. In FY2016, four attractions applied and received a total of $22,090. In FY2017, four attractions applied and received $25,216. In FY18, four attractions applied and received $28,487. The total economic impact of tourism in Warren County grew 3.1% from $436 million in calendar year 2016 to $449 million in 2017. During the same period, tourism in the state as a whole increased 3.8%. 2017 tourist activity in Warren County created $6 million in local tax revenue, $41 million in state tax revenue, supported 4,607 jobs and produced $99 million in worker income. As a result of taxes generated by tourist spending in Warren County in 2017, each of the 45,387 Warren County households paid $1,036 less in local and state taxes. Warren County ranks fifth out of Kentucky’s 120 counties in economic impact of tourism.
FINANCIAL STATEMENTS
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
STATEMENT OF NET POSITION
JUNE 30, 2018
Governmental
Activities
ASSETS AND DEFERRED OUTFLOWS
CURRENT ASSETS
Cash and cash equivalents 772,317$
Restricted cash 239,833
Certificates of deposit 1,013,039
Prepaid insurance 36,357
Accounts receivable:
Room tax 360,791
Visitors guide and co-op ads 14,225
Inventory 22,631
TOTAL CURRENT ASSETS 2,459,193
NONCURRENT ASSETS
Nondepreciated capital assets:
Land 45,980
Depreciated capital assets:
Buildings and improvements 262,136
Furniture and equipment 73,507
Less: Accumulated depreciation (208,031)
TOTAL NONCURRENT ASSETS 173,592
TOTAL ASSETS 2,632,785
DEFERRED OUTFLOWS OF RESOURCES
Pension and OPEB 391,133
TOTAL DEFERRED OUTFLOWS OF RESOURCES 391,133
TOTAL ASSETS AND DEFERRED OUTFLOWS 3,023,918$
See accompanying notes
Governmental
Activities
LIABILITIES, DEFERRED INFLOWS AND NET POSITION
CURRENT LIABILITIES
Accounts payable 12,093$
Accrued liabilities 182,287
TOTAL CURRENT LIABILITIES 194,380
LONG TERM LIABILITIES
Net pension liability - OPEB 311,603
Net pension liability 907,263
TOTAL LONG TERM LIABILITIES 1,218,866
TOTAL LIABILITIES 1,413,246
DEFERRED INFLOWS OF RESOURCES
Pension and OPEB 99,976
TOTAL DEFERRED INFLOWS OF RESOURCES 99,976
NET POSITION
Net investment in capital assets 173,592
Restricted 1,476,348
Unrestricted (139,244)
TOTAL NET POSITION 1,510,696
TOTAL LIABILITIES, DEFERRED INFLOWS AND NET POSITION 3,023,918$
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BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2018
Net (Expense) Revenue and
Program Revenues Changes in Net Position
Operating
Charges for Grants and Governmental
FUNCTIONS/PROGRAMS Expenses Services Contributions Activities
GOVERNMENTAL ACTIVITIES:
Projects and events 1,948,250$ -$ -$ (1,948,250)$
Advertising and other promotions 862,829 33,477 92,603 (736,749)
Administration and other 868,617 - - (868,617)
Depreciation - unallocated 9,139 - - (9,139)
TOTAL GOVERNMENTAL ACTIVITIES 3,688,835$ 33,477$ 92,603$ (3,562,755)
General revenues and receipts:
Room tax 3,397,683
Investment earnings 12,106
Miscellaneous 27,908
Total general revenues and special items 3,437,697
Change in net position (125,058)
Net position July 1, 2017 (as restated), see note J 1,635,754
Net position June 30, 2018 1,510,696$
See accompanying notes 10
FUND FINANCIAL STATEMENTS
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
BALANCE SHEET - GOVERNMENTAL FUNDS
JUNE 30, 2018
Special Nonmajor Funds
Tourism
General Fund Projects Other Funds Total
ASSETS
Cash and cash equivalents 766,732$ -$ 5,585$ 772,317$
Certificates of deposit 1,003,200 - 9,839 1,013,039
Restricted cash 239,833 239,833
Prepaid expenses 36,357 - - 36,357
Accounts receivable:
Room tax 343,142 17,649 - 360,791
Visitors guide and co-op ads 14,225 - - 14,225
Inventory 22,631 - - 22,631
TOTAL ASSETS 2,186,287$ 257,482$ 15,424$ 2,459,193$
LIABILITIES
Accounts payable 12,093$ -$ -$ 12,093$
Accrued liabilities:
Due to CCC 60,757 - - 60,757
Due to SKYPAC 117,763 - - 117,763
Payroll and related expenses 3,767 - - 3,767
TOTAL LIABILITIES 194,380 - - 194,380
FUND BALANCE
Nonspendable 58,988 - - 58,988
Restricted - 257,482 - 257,482
Committed 1,218,866 - - 1,218,866
Assigned - - 15,424 15,424
Unassigned 714,053 - - 714,053
TOTAL FUND BALANCES 1,991,907 257,482 15,424 2,264,813
TOTAL LIABILITIES AND FUND BALANCES 2,186,287$ 257,482$ 15,424$ 2,459,193$
TOTAL FUND BALANCE/TOTAL GOVERNMENTAL FUNDS 2,264,813
Amounts reported in the statement of net position are different because:
Difference in deferred outflows and inflows related to pension and OPEB expense. 291,157
Capital assets are not financial resources and therefore are not
reported as assets in governmental funds. The cost of the
assets are $381,623 and accumulated depreciation is $208,031. 173,592
Net pension and OPEB obligations are not due and payable in the current period and, therefore
is not reported in governmental funds. (1,218,866)
TOTAL NET POSITION 1,510,696$
See accompanying notes 11
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2018
Special Nonmajor Funds
Tourism
General Fund Projects Other Funds Total
REVENUES
Room tax 3,245,807$ 151,876$ -$ 3,397,683$
Matching funds 92,603 - - 92,603
Advertising sales 33,477 - - 33,477
Merchandise sales 27,908 - - 27,908
Interest income 11,435 583 88 12,106
TOTAL REVENUES 3,411,230 152,459 88 3,563,777
EXPENDITURES
Projects and events 1,798,252 150,000 - 1,948,252
Advertising and other promotions 862,829 - - 862,829
Administration and other 779,406 4,000 - 783,406
TOTAL EXPENDITURES 3,440,487 154,000 - 3,594,487
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES (29,257) (1,541) 88 (30,710)
NET CHANGE IN FUND BALANCE (29,257) (1,541) 88 (30,710)
FUND BALANCE JULY 1, 2017 2,021,164 259,023 15,336 2,295,523
FUND BALANCE JUNE 30, 2018 1,991,907$ 257,482$ 15,424$ 2,264,813$
NET CHANGE IN FUND BALANCE (30,710)$
Governmental funds report capital outlays as expenditures. However, in the
statement of activities, the cost of those assets is allocated over their
estimated useful lives as depreciation expense. (2,343)
Pension and OPEB expenses are not reported as expenditures in the governmental funds. (92,005)
NET CHANGE IN NET POSITION (125,058)$
See accompanying notes 12
NOTES TO THE FINANCIAL STATEMENTS
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BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2018
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS The Reporting Entity The Bowling Green Area Convention & Visitors Bureau (the Bureau Group) operates under the provisions of Kentucky Revised Statutes (KRS) No. 91A.350 (2), 91A.360, 91A.390 and other applicable provisions of KRS as they now exist and as they may hereafter be amended. Under the provisions set forth by KRS, the Bureau Group is authorized to promote convention and tourist activity in the Bowling Green, Kentucky and Warren County, Kentucky area. The Bureau Group is not included in any other governmental reporting entity as defined in Section 2100, Codification of Governmental Accounting and Financial Reporting Standards, as the Bureau Group members are appointed according to the specific guidelines under the provisions of Kentucky Revised Statutes (KRS) No. 91A.360. In September 1990, the Bowling Green-Warren County Tourism Development Corporation (the Corporation), a non-stock, non-profit corporation, was formed under the laws of the Commonwealth of Kentucky. The general purposes of the Corporation are to promote convention and tourist activity and to provide assistance to governmental agencies, commissions, and organizations devoted to such purposes. The Bowling Green Area Convention & Visitors Bureau Group (the Bureau Group) includes the combined financial statements of the Bowling Green Area Convention & Visitors Bureau and the Bowling Green-Warren County Tourism Development Corporation. The statements are combined because of similar activities and joint management. The activities of the Bowling Green-Warren County Tourism Development Corporation are reported with the General Fund, for the 2018 year end they have zero funds. All inter-organizational activities have been eliminated. Summary of Significant Accounting Policies The Bureau Group’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (statements and interpretations). Basis of Presentation Financial Statements
The Statement of Net Position and Statement of Activities display information about the Bureau Group as a whole. They include all funds. The Bureau Group has no significant business-type activities so all its activities are considered governmental activities. Governmental activities generally are financed through taxes and other non-exchange revenues. The financial statements are prepared using the economic measurement focus. This differs from the manner in which the fund financial statements are prepared. The fund financial statements therefore include reconciliation with a brief explanation to better identify the relationship between the financial statements and the fund financial statements.
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The Statement of Activities presents a comparison between direct expense and program revenues for each function or program. Direct expenses are those that are specifically associated with a service or program and therefore clearly identifiable to a particular function. Program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of a particular program and charges paid by the recipient of goods or services offered by the program. Revenues not classified as program revenues are presented as general revenues. Both the Statement of Net Position and Statement of Activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset is used. Revenues, expenses, gains, losses, assets and liabilities resulting from exchange transactions are recognized when the exchange takes place. Fund Financial Statements
The financial transactions of the Bureau Group are reported in individual funds in the fund financial statements, each of which is considered to be a separate set of self-balancing accounts which constitute its assets, liabilities, fund equity, revenues and expenditures/expenses. The major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. A fund is considered major if it is the primary operating fund of the Bureau Group or meets the following criteria: 1. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental fund are at least 10% of the corresponding total for all funds of that category or type, and 2. The same element of the individual governmental fund that met the 10% test is at least 5% of the corresponding total for all governmental fund combined. 3. In addition, any other governmental fund that the Bureau Group believes is particularly important to financial statement users may be reported as a major fund. The Bureau Group only has governmental funds. These fund types are accounted for using a flow of current financial resources measurement focus. The financial statements are a balance sheet, which generally includes only current assets and current liabilities, and a statement of revenues, expenditures and changes in fund balances, which reports on the source (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. In the fund financial statements, funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or soon enough thereafter to pay current liabilities. For this purpose, the Bureau Group considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. The funds of the financial reporting entity are described below: Major Funds The General Fund is the primary operating fund of the Bureau Group and is always classified as a major fund. It is used to account for all activities except those legally or administratively required to be accounted for in other funds. This is a budgeted fund and any unrestricted fund balances are considered as resources available for use.
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The Special Tourism Projects Fund was set-up and operates under the provisions of ordinance number BG2004-67 of the City of Bowling Green, KY. In this ordinance, the city reallocated the 3% received from one hotel to the Bowling Green Area Convention & Visitors Bureau to fund special nonprofit tourism projects that are projected to increase overnight stays in Bowling Green and Warren County hotels, motels and related facilities. These funds shall be placed in a special project account and shall not be a part of the general operating budget of the Bureau and be considered restricted.
Non-major Funds
• Special Athletics Fund – This fund accounts for contributions and expenditures in relation to the Kentucky High School Athletics Association (KHSAA) and other athletic events in Bowling Green, KY.
• Sign Project Fund – This fund accounts for the receipts and expenditures for maintenance of the tourism signs that have been erected in the local area.
Cash and Cash Equivalents The Bureau Group considers demand deposits, money market funds, and other investments with an original maturity of 90 days or less, to be cash equivalents. Investments-Certificates of Deposit Investments in certificates of deposit are considered held to maturity and are carried at cost, which approximates market value. Any early redemption may be subject to early withdrawal penalties under federal depository bank regulations. At June 30, 2018, maturities ranged from six months to twelve months. Accounts Receivable Receivables consist of all revenues earned at year-end and not yet received. The room tax receivables are recorded net of estimated uncollectible amount of ($0). All receivables are expected to be collected. Inventories Inventories are stated at lower cost or market determined by first-in, first-out method. All inventories consist of various merchandise that relate to tourism. This activity classifies as a business-type activity, but it is considered an insignificant activity of the primary government so therefore it is not reported as an enterprise fund. Interfund Receivables and Payables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Each fund is a distinct fiscal and accounting entity, and thus interfund transactions are recorded in each fund affected by a transaction. During the year the General Fund receives and disburses funds that relate to other funds, such as the Special Tourism Projects Fund, Special Athletics Fund, and the Sign Project Fund.
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Capital Assets All acquisitions of property and equipment in excess of $500 and all expenditures for repairs, maintenance, renewals, and betterments that materially prolong the useful lives of assets are capitalized. The accounting treatment over property and equipment depends on whether they are reported in the financial statements or the fund financial statements. Financial Statements
In the financial statements capital assets are valued at historical cost. Donated capital assets are recorded at their estimated fair value at the date of donation. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Building 40 years Office Furniture & Equipment 5-15 years Computers 5 years Expenditures for repairs and maintenance are expensed as incurred. Gains and losses on disposition of property and equipment are included in income as realized. Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as expenditures of the governmental fund. Fund Equity Equity is classified as net position and displayed in three components: Net investment in capital assets – Consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. At June 30, 2018 there were no notes or other borrowings. Restricted net position – Consists of net position with constraints placed on the use either by 1) external groups such as creditors or laws or regulations, or 2) that are imposed by the government’s own constitutional provisions or enabling legislation. At June 30, 2018 there was $1,476,348 in restricted net position. $257,482 is for Special Tourism Projects and $1,218,866 are pension and other post-employment benefit liabilities. It is the Bureau Group’s policy to use restricted amounts first and then unrestricted amounts as needed. Unrestricted, including reserved – All other net position that do not meet the definition of “restricted” or “net investment in capital assets”. The general fund reserve is an internally designated amount to serve as a contingency in the event of any revenue shortfalls or extraordinary expenses. The reserve for the other funds is for their designated purpose. Fund Balance Nonspendable – includes amounts that cannot be spent because they are either not spendable in form or are legally or contractually required to be maintained intact. The Bureau Group has $58,988 reported nonspendable for the year ended June 30, 2018. These funds are $36,357 of prepaid expenses and $22,631 of inventory.
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Restricted – includes amounts restricted by external sources (creditors, grantors, laws of other governments, etc.) or by constitutional provision or enabling legislation. There are $257,482 of restricted funds in the Special Tourism Project for the year ended June 30, 2018. Committed – includes amounts that can only be used for specific purposes. Committed fund balance is reported pursuant to orders passed by the Board, The Bureau Group’s highest level of decision making authority. Commitments may be modified or rescinded only through orders approved by the Board. As if June 30, 2018 there are $1,218,866 reported for pension liability and OPEB liability for the Bureau Group’s share of the County Employees’ Retirement System pension. Assigned – includes amounts that the Bureau Group intends to use for a specific purpose, but do not meet the definition of restricted or committed fund balance. The Bureau Group has not adopted a policy on who may assign funds for specific uses. There are $15,424 in nonmajor funds that have an assigned fund balance. Unassigned – includes amounts that have not been assigned to other funds or restricted, committed or assigned to a specific purpose within the general fund. Liabilities Financial Statements
All other current liabilities to be paid from governmental resources are reported in the Government-Wide Financial Statements. Fund Financial Statements
Other current liabilities are not reported as a liability in the fund financial statements and in the year that the payment is made it will be reported as an expenditure. General Revenue The Bureau Group was established by joint ordinance BG79-13, 79-2-WC as defined in KRS 91A.350. Revenue is provided by ordinances of the City of Bowling Green, Kentucky and Warren County, Kentucky, whereby all motor courts, hotels, inns or similar accommodation businesses collect and pay a 4% transient room tax to the Treasurer of the City of Bowling Green, Kentucky on a monthly basis and a 2% transient room tax to the Warren County Treasurer on a monthly basis. The City of Bowling Green remits within 45 days after the end of each month the 3% transient room tax portion to the Bureau Group as defined in KRS 91A.390(1) and Bowling Green City Code of Ordinances 18-5.01(a). The City of Bowling Green remits the 1% transient room tax portion to the convention center as defined in KRS 91A.390(1) and Bowling Green City Code of Ordinances 18-5.01(b). The Warren County Treasurer deposits the 2% transient room tax into a special fund to be used solely for the retirement of the Southern Kentucky Performing Arts Center bond issuances as defined in KRS 91A.392(1) and Warren County Fiscal Court Ordinance No. 07-55WC. If the joint ordinance is rescinded or revised, it could significantly affect the Bureau Group's revenue and future operation. However, this is not anticipated. Matching Funds The Kentucky Department of Tourism reimburses convention & visitors bureaus and tourist commissions 50 to 90% of the basic costs of digital, newspaper, magazine, radio, billboard and television advertising for the purposes of promoting, when directed towards areas other than the immediate locality. The Bureau Group was allocated $92,603 in matching funds for the current year.
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Income Taxes The Bureau Group and the Corporation are exempt from federal and state income taxes under section 115(2) and 501(a) of the Internal Revenue Code and corresponding provisions of state income tax laws, respectively. Accordingly, these financial statements do not include a provision for income taxes. Pensions and Other Post-Employment Benefits (OPEB) For purposes of measuring the net pension liability, other post-employment benefits liability, deferred outflows of resources and deferred inflows of resources related to pensions and OPEB, and pension expense, information about the fiduciary net position of the Kentucky County Employees Retirement System (CERS) and additions to/deductions from CERS’s fiduciary net position have been determined on the same basis they are reported by CERS. For this purpose, benefit payments are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. Concentrations The Bureau Group had approximately $3,397,683 or 95% of total gross revenue from the City of Bowling Green, Kentucky and Warren County, Kentucky for room tax revenues for the year ended June 30, 2018. Per the city and county ordinances referenced above, of the $3,397,683 amount, $566,926 and $1,129,979 were distributed to the Convention Center Corporation and Southern Kentucky Performing Arts Center, respectively. The payment of these amounts are included in projects and events. The remaining $1,700,778 was used for operations of the Bureau Group. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, designated fund balances, and disclosure of contingent assets and liabilities at the date of the general purpose financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ. Budgetary Principles The Bureau Group’s budget is adopted on the same basis of accounting used to reflect actual revenues and expenditures recognized on a basis consistent with accounting principles generally accepted in the United States of America.
NOTE B – KENTUCKY REVISED STATUTE In accordance with Kentucky Revised Statute (KRS) 66.480, the deposits are to be insured by the federal depository insurance or collateralized to the extent uninsured by any obligations permitted by KRS 41.240(4). According to KRS 41.240(4), it shall either pledge or provide as collateral securities or other obligations having an aggregate current face value or current quoted market value at least equal to the deposits. According to KRS 66.480, the Bureau Group is allowed to invest in obligations of the U.S. Treasury and U.S. agencies, repurchase agreements, obligations of the Commonwealth of Kentucky and its agencies, insured savings and loans, or interest bearing deposits of insured national or state banks.
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NOTE C - CASH AND CERTIFICATES OF DEPOSIT Cash and certificates of deposit at June 30, 2018 are held in checking and certificates of deposit with a local bank. Custodial credit risk is the risk that in the event of a bank failure, the Bureau Group’s deposits may not be returned. The Bureau Group does not have a deposit policy for custodial credit risk. As of June 30, 2018, $1,572,935 of government’s bank balance of $2,072,935 was exposed to custodial credit risk as follows: Uninsured and collateral held by pledging bank’s correspondent $1,572,935 bank in the Bureau Group’s name
NOTE D - CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2018, was as follows:
Balance Balance
at at
Description 7/1/2017 Additions Disposals 6/30/2018
Land 45,980$ -$ -$ 45,980$
Building and Building
Improvements 262,136 1,100 (2,448) 260,788
Furniture and
Equipment 73,066 5,696 (3,907) 74,855
Total 381,182$ 6,796$ (6,355)$ 381,623$
Accumulated Depreciation:
Sales/
Description 7/1/2017 Depreciation Disposals 6/30/2018
Building and Building
Improvements 134,692$ 6,408$ -$ 141,100$
Furniture and
Equipment 70,555 2,731 (6,355) 66,931
Total 205,247$ 9,139$ (6,355)$ 208,031$
NOTE E - OPERATING LEASES The Bureau Group leases automobiles, billboards, and office equipment under operating leases. The automobile leases expire over two to three years and the billboard leases generally expire over three years. Rental expense under these operating leases for the year ended June 30, 2018, was $96,078.
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At June 30, 2018, the future minimum lease payments were as follows:
2019 66,437$
2020 11,328
2021 4,128
2022 2,068
Total 83,961$
NOTE F – COMMITMENTS The Bureau Group entered into a contract with Simpleview, LLC, dated June 1, 2018 for the design, programming and hosting of the use of CRM software. The fee for Simpleview, LLC to host the website is $23,333 per year. On June 11, 2018, The Bureau Group entered into a contract with Mid South Conference through 2025, in which Mid South Conference will provide sponsorship rights to the Bureau Group, in exchange for annual fees and assisting Mid South Conference procure athletic facilities in Bowling Green Warren County. At June 30, 2018 commitments were as follows:
2019 43,433$
2020 48,933
2021 20,000
2022 25,000
2023 30,000
Thereafter 70,000
Total 237,366$
NOTE G - EMPLOYEE BENEFITS The Bureau Group participates in a cost-sharing multiple-employer defined benefit pension plan, the Commonwealth of Kentucky County Employees Retirement System. The plan provides benefits to employees as defined by Kentucky Retirement Systems. Under the provisions of the Kentucky Revised Statute Section 61.645, the Board of Trustees of the Kentucky Retirement System administers CERS and has the authority to establish and amend benefit provisions. The Kentucky Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for CERS. That report may be obtained from http://kyret.ky.gov/. Benefits provided CERS provides retirement, health insurance, death and disability benefits to Plan members and beneficiaries. Employees are vested in the plan after five years’ service. For retirement purposes, employees are grouped into three tiers, based on hire date:
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Tier 1 Participation date Before September 1, 2008
Unreduced retirement 27 years service or 65 years old
Reduced retirement At least 5 years service and 55 years old
At least 25 years service and any age
Tier 2 Participation date September 1, 2008 - December 31, 2013
Unreduced retirement At least 5 years service and 65 years old
Or age 57+ and combined service years plus age equal 87
Reduced retirement At least 10 years service and 60 years old
Tier 3 Participation date After December 31, 2013
Unreduced retirement At least 5 years service and 65 years old
Or age 57+ and combined service years plus age equal 87
Reduced retirement Not available
Cost of living adjustments are provided at the discretion of the State Legislature. Retirement is based on date of hire and the benefit tier of which the participant falls. Reduced benefits are only available for participants that fall in certain benefit tiers. CERS was created by the Kentucky General assembly. Benefits are fully vested upon reaching 60 months of service. Benefits of CERS members are calculated on the basis of age, final average salary and service credit. CERS also provides survivor, disability and health care coverage. Authority to establish and amend benefits is provided by Kentucky Revised Statutes Section 61.645. Contributions—Required contributions to the employee are based on the tier:
Required contribution
Tier 1 5%
Tier 2 5% + 1% for insurance
Tier 3 5% + 1% for insurance
The amount contributed to the plan by the Bureau Group on behalf of its employees in 2018 was $67,497. Contributions for the years ended June 30, 2017 and June 30, 2016 were $70,495 and $62,094 respectively. Plan members are required to contribute 5% of their annual salary through payroll deductions and the Bureau Group is required to contribute an actuarially determined amount. The current rate for the year ended June 30, 2018 is 19.18% of the employee’s total covered compensation. In addition to the defined benefit pension plan, full time employees are eligible to participate in the Kentucky Public Employees Deferred Compensation Authority’s defined contribution pension plan (401k and 457). Employees specify the dollar amount to be withheld from each paycheck. The Bureau Group does not provide a match for contributions made. For the fiscal year ended June 30, 2018, contributions made by employees totaled $60,408. Contributions for the years ended June 30, 2017 and June 30, 2016 were $59,716 and $57,641 respectively.
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Pension Liabilities, Pension Expense, and Deferred Inflows of Resources Related to Pensions
At June 30, 2018 the Bureau Group reported a liability of $907,263 for its proportionate share of the net pension liability related to the County Employees Retirement System, which is an increase of $156,041 from the prior year. The net pension liability was measured at June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Bureau Group’s proportion of the net pension liability was based on a projection of the Bureau Group’s long-term share of contributions to the pension plan relative to the projected contributions of all participating governmental entities, actuarially determined. At June 30, 2018 the Bureau’s proportion was .01550%, which is an increase of .00024% from its proportion measured as of June 30, 2017 of .01526%. For the year ended June 30, 2018, the Bureau Group recognized pension expense of $125,950. At June 30, 2018 the Bureau reported deferred outflows and inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual
experience 1,125$ 23,030$
Changes of assumptions 167,415 -
Net difference between projected and actual
earnings on pension plan investments 71,854 -
Changes in proportion and differences between
employer contributions and proportionate
share of contributions 15,439 60,632
Bureau Group's contributions subsequent to the
measurement date 50,957 -
Total 306,790$ 83,662$
The $50,957 of deferred outflows of resources resulting from the Bureau Group’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows: Year ending June 30, 2019 $78,936 2020 72,867 2021 32,017 2022 (11,650) $172,170 Deferred outflows and inflows are related to differences between projected and actual earnings on plan investments are netted and amortized over a closed five-year period. Those changes in net pension liability that are recorded as deferred outflows or inflows of resources that arise from changes in actuarial assumptions or other inputs and differences between expected or actual experience are amortized over the weighted average remaining service life of all participants in the respective qualified pension plan and recorded as a component of pension expense beginning with the period in which they are incurred.
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Actuarial Methods and Assumptions
For financial reporting, the actuarial valuation as of June 30, 2017 was performed by Gabriel Roeder Smith (GRS). The total pension liability, net pension liability, and sensitivity information as of June 30, 2017 were based on an actuarial valuation date of June 30, 2016. The total pension liability was rolled-forward from the valuation date (June 30, 2016) to the plan’s fiscal year ending, June 30, 2017, using generally accepted actuarial principles. GRS did not perform the actuarial valuation as of June 30, 2016 but did replicate the prior actuary’s valuations results on the same assumption, methods, and data, as of that date. The total pension liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:
Valuation Date June 30, 2016
Experience Study July 1, 2008 - June 30, 2013
Actuarial Cost Method Entry Age Normal
Amortization Method Level percentage of pay
Remaining Amortization Period 26 years, Closed
Payroll Growth Rate 4.00%
Asset Valuation Method 20% of the difference between the market value of assets
and the expected actuarial value of assets is recognized
Inflation 3.25%
Salary Increase 4.00%, average
Investment Rate of Return 7.50%
Mortality rates for active members were based on the RP-2000 Combined Mortality Table projected with Scale BB to 2013 (multiplied by 50% for males and 30% for females). For healthy retired members and beneficiaries, the mortality table used is the RP-2000 Combined Mortality Table projected with Scale BB to 2013 (set back for one year for females). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale BB to 2013 (set back four years for males) is used for the period after disability retirement. The long-term expected rate of return on plan assets was determined using a method in which best-estimate ranges of expected future real rates of return (expected return, net of investment expense and inflation) were developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The capital market assumptions developed by the investment consultant are intended for use over a 10-year horizon and may not be useful in setting the long-term rate of return for funding pension plans which covers a longer timeframe. The assumption is intended to be a long-term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
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Target Long-Term Expected Real
Asset Class Allocation Rate of Return
US Equity 17.50 % 5.97 %
International Equity 17.50 7.85
Global Bonds 4.00 2.63
Global Credit 2.00 3.63
High Yield 7.00 5.75
Emerging Market Debt 5.00 5.50
Private Credit 10.00 8.75
Real Estate 5.00 7.63
Absolute Return 10.00 5.63
Real Return 10.00 6.13
Private Equity 10.00 8.25
Cash 2.00 1.88
Total 100.00 %
The discount rate used to measure the total pension liability was 6.25%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates. The long-term assumed investment rate of return was applied to the remaining 26-year amortization period of the unfunded actuarial accrued liability. Sensitivity of the Net Pension Liability to Changes in the Discount Rate.
The following present’s the Bureau Group’s proportionate share of the net pension liability using the discount rate of 6.25%, as well as what the Bureau Group’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.25%) or 1-percentage-point higher (7.25%) than the current rate:
Current
1% Decrease Discount Rate 1% Increase
CERS 5.25% 6.25% 7.25%
Bureau Group's proportionate share
of net pension liability 1,144,254$ 907,263$ 709,021$ Detailed information about the pension plan’s fiduciary net position is available in the separately issued report. It can be found at https://kyret.ky.gov.
NOTE H – OTHER POST-EMPLOYMENT BENEFITS (OPEB) At June 30, 2018, net OPEB liability and related deferred outflows of resources and deferred inflows of resources are as follows:
Deferred Inflows of Resources 16,314$
Deferred Outflows of Resources 84,343$
Net OPEB Liability 311,603$
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Plan description
In addition to the pension benefits explained in the note above, the CERS non-hazardous, also is a cost-sharing, multiple-employer defined benefit OPEB Plan. Under Kentucky Revised Statute 61.645, the Insurance Fund was established to provided hospital and medical insurance for eligible members receiving benefits from CERS. The KRS Board of Trustees is responsible for the proper operation and administration of KRS. The KRS issues a publicly available financial report that can be obtained by writing to Kentucky Retirement System, Perimeter Park West, 1260 Louisville Road, Frankfort, Kentucky 40601. Benefits provided
The eligible non-Medicare retirees are covered by the Department of Employee Insurance (DEI) plans. KRS submits the premium payments to DEI. The Board contracts with Humana to provide health care benefits to the eligible Medicare retirees though a Medicare Advantage Plan. The Insurance Fund pays a prescribed contribution for whole or partial payment of required premiums to purchase hospital and medical insurance. The amount of contribution paid by the Insurance Fund is based on years of service. For members participating prior to July 1, 2003, years of service and respective percentage of the maximum contribution are as follows:
Years of
Service % Paid
20 + Years 100%
15 - 19 Years 75%
10 - 14 Years 50%
4 - 9 Years 25%
< 4 Years 0%
Portion Paid by Insurance Fund
As a result of House Bill 290 (2004 Kentucky General Assembly), medical insurance benefits are calculated differently for members who began participating on, or after July 1, 2003. Once members reach a minimum vesting period of 10 years, non-hazardous employees whose participation began on or after July 1, 2003, earn $10 per month for insurance benefits at retirement for every year of earned service without regard to a maximum dollar amount. The Kentucky General Assembly reserves the right to suspend or reduce this benefit if, in its judgement, the welfare of the Commonwealth so demands. Contributions
The employee contribution rate is set by state statute. The Bureau Group’s contractually required contribution rate for the year ended June 30, 2018 was 19.18% (14.48% pension fund and 4.70% insurance fund) and 18.68% (13.95% pension fund and 4.73% insurance fund) for the year ended June 30, 2017. The actuarially determined rates set by the Board for the fiscal years was a percentage of each employee’s creditable compensation. Contributions to the insurance fund from the Bureau Group were $16,540 and $17,850 for the years ended June 30, 2018 and 2017, respectively.
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OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources
Related to OPEB
At June 30, 2018, the Bureau Group reported a liability of $311,603 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2017, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2016. The total OPEB liability was rolled-forward from the valuation date to the plan’s fiscal year end, June 30, 2017, using generally accepted actuarial principles. The Bureau Group’s proportion of the net OPEB liability was based on the Bureau Group’s share of contributions to the OPEB plan relative to the non-hazardous contributions of all participating employers. At June 30, 2018 the Bureau Group’s proportion for the non-hazardous system was .01550%. For the year ended June 30, 2018, the Bureau Group recognized OPEB expense of $33,552. At June 30, 2018, the Bureau Group reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual
experience -$ 865$
Changes of assumptions 67,803 -
Net difference between projected and actual
earnings on pension plan investments - 14,726
Changes in proportion and differences between
employer contributions and proportionate
share of contributions - 723
Bureau Group's contributions subsequent to the
measurement date 16,540 -
Total 84,343$ 16,314$
The $16,540 of deferred outflows of resources resulting from the Bureau Group’s contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ending June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources will be recognized in OPEB expense as follows:
Year ending June 30,
2019 8,859$
2020 8,859
2021 8,859
2022 8,859
2023 12,541
Thereafter 3,512
51,489$
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Actuarial Methods and Assumptions
For financial reporting, the actuarial valuation as of June 30, 2017 was performed by Gabriel Roeder Smith (GRS). The total OPEB liability, net OPEB liability, and sensitivity information as of June 30, 2017 were based on an actuarial valuation date of June 30, 2016. The total OPEB liability was rolled-forward from the valuation date (June 30, 2016) to the plan’s fiscal year ending, June 30, 2017, using generally accepted actuarial principles. GRS did not perform the actuarial valuation as of June 30, 2016 but did replicate the prior actuary’s valuations results on the same assumption, methods, and data, as of that date. . The total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:
Valuation Date June 30, 2016
Experience Study July 1, 2008 - June 30, 2013
Actuarial Cost Method Entry Age Normal
Amortization Method Level percentage of pay
Remaining Amortization Period 26 years, Closed
Payroll Growth Rate 4.00%
Asset Valuation Method 20% of the difference between the market value of assets
and the expected actuarial value of assets is recognized
Inflation 3.25%
Salary Increase 4.00%, average
Investment Rate of Return 7.50%
Mortality rates were based on the RP-2000 Combined Mortality Table projected to 2013 with Scale BB (set back 1 year for females). The long-term expected rate of return on plan assets was determined using a building-block method in which best-estimate ranges of expected future real rates of return were developed for each major asset class. These ranges were combined by weighting the expected future real rates of return by the target asset allocation percentage. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
Target Long-Term Expected Real
Asset Class Allocation Rate of Return
US Equity 17.50 % 5.97 %
International Equity 17.50 7.85
Global Bonds 4.00 2.63
Global Credit 2.00 3.63
High Yield 7.00 5.75
Emerging Market Debt 5.00 5.50
Private Credit 10.00 8.75
Real Estate 5.00 7.63
Absolute Return 10.00 5.63
Real Return 10.00 6.13
Private Equity 10.00 8.25
Cash 2.00 1.88
Total 100.00 %
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Discount rate
The discount rate used to measure the total OPEB liability was 5.84% for CERS non-hazardous assumed that local employers would contribute the actuarially determined contribution rate of projected compensation over the remaining 26 years (closed) amortization period of the unfunded actuarial accrued liability. The discount rate determination used an expected rate of return of 6.25%, and a municipal bond rate of 3.56%, as reported in Fidelity Index’s “20 – Year Municipal GO AA Index” as of June 30, 2017. However, the cost associated with the implicit employer subsidy was not included in the calculation of the System’s actuarial determined contributions, and any cost associated with the implicit subside will not be paid out of the System’s trusts. Therefore, the municipal bond rate was applied to future expected benefit payments associated with the implicit subsidy. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
The following present’s the Bureau Group’s proportionate share of the net OPEB liability using the discount rate that is one percentage point lower (4.84%) or one percentage point higher (6.84%) is as follows:
Current
1% Decrease Discount Rate 1% Increase
CERS 4.84% 5.84% 6.84%
Bureau Group's proportionate share
of net OPEB liability 396,498$ 311,603$ 240,957$ Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates
The net OPEB liability of the Bureau Group, as well as what the Bureau Group’s net OPEB liability would be if it were calculated using healthcare cost trend rates that is one percentage point lower (6.5%) or one percentage point higher (8.5%) is as follows
Healthcare Cost
Trend Rate -1% Trend Rate Trend Rate +1%
(6.5% decreasing (7.5% decreasing (8.5% decreasing
Bureau Group's to 4.00%) to 5.00%) to 6.00%)
proportionate share
of net OPEB liability
239,016$ 311,603$ 405,962$
NOTE I – RECENT GASB PRONOUNCEMENTS Management has not currently determined what, if any, effect of the implementation of the following statements may have on the financial statements.
GASB Statement No. 87, Leases, issued June 2017, will be effective for periods beginning after December 15, 2019. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that were previously classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provision of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities.
29
NOTE J – RESTATEMENT OF BEGINNING NET POSITION The Bureau Group implemented Governmental Account Standard Board Statement No.75, Accounting
and Financial Reporting for Postemployment Benefits Other than Pensions, which requires state and local governmental employers to record the net OPEB liability. As such, the financial statements report a decrease of beginning net position in the amount of $226,562. The effect on fiscal year 2018 is as follows: Net position, July 1, 2017
as previously reported $1,862,316
Adjustment for net OPEB liability (226,562)
Net position - July 1, 2017, as restated $1,635,754
NOTE K – SUBSEQUENT EVENTS The Bureau Group has evaluated subsequent events through November 7, 2018, the date which the financial statements were available to be issued.
REQUIRED SUPPLEMENTARY INFORMATION
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
BUDGETARY COMPARISON SCHEDULE FOR THE GENERAL FUND
FOR THE YEAR ENDED JUNE 30, 2018
Variances with
Original Final Actual Final Budget
REVENUES:
Room tax 3,439,600$ 3,205,780$ 3,245,807$ 40,027$
Matching funds 93,224 92,603 92,603 -
Advertising sales 36,000 33,000 33,477 477
Merchandise sales 15,000 27,500 27,908 408
Interest income 5,000 11,000 11,435 435
TOTAL REVENUES 3,588,824 3,369,883 3,411,230 41,347
EXPENDITURES:
PROJECTS AND EVENTS
CCC payment 600,000 562,000 566,926 (4,926)
SKYPAC payment 1,200,000 1,111,000 1,129,979 (18,979)
Special events 122,750 101,400 101,347 53
TOTAL PROJECTS AND EVENTS 1,922,750 1,774,400 1,798,252 (23,852)
ADVERTISING AND OTHER PROMOTIONS
Advertising and promotions 717,709 805,200 770,206 34,994
Brochures 56,000 64,900 64,767 133
Merchandise- resale and specialty 13,000 16,700 17,071 (371)
Regional assessment 8,000 7,900 7,834 66
Meeting and conventions 5,500 3,000 2,951 49
TOTAL ADVERTISING AND OTHER PROMOTIONS 800,209 897,700 862,829 34,871
ADMINISTRATION AND OTHER
Payroll and part-time services 641,000 599,000 511,453 87,547
Pension and OPEB - 96,000 159,502 (63,502)
Telephone 9,500 8,300 8,163 137
Postage 12,000 8,400 7,730 670
Insurance 14,000 13,600 13,510 90
Office supplies 7,000 4,200 3,581 619
Attorney fees 3,000 2,200 2,132 68
Office equipment and maintenance 22,500 16,700 16,678 22
Capital outlay 2,200 6,800 6,795 5
Research 14,300 9,300 9,300 -
Accounting and audit fees 34,400 35,600 35,467 133
Dues and subscriptions 12,600 10,300 10,082 218
Depreciation 8,165 8,213 9,139 (926)
Travel 54,400 56,200 55,875 325
Auto leasing 12,000 15,200 17,279 (2,079)
Utilities 11,000 9,600 9,556 44
Auto expense 1,500 2,700 2,630 70
WKU intern 5,500 1,000 1,000 -
Service charges 800 700 678 22
TOTAL ADMINISTRATION AND OTHER 865,865 904,013 880,550 23,463
TOTAL EXPENDITURES 3,588,824 3,576,113 3,541,631 34,482
EXCESS (DEFICIT) OF REVENUES OVER EXPENDITURES - (206,230) (130,401) 75,829
Transfers in - 206,230 - 206,230
NET EXCESS OF REVENUES OVER EXPENDITURES -$ -$ (130,401) 282,059$
FUND BALANCE, JULY 1, 2017, AS RESTATED 2,021,164
Differences - budget to GAAP
Pension expense is not included in fund financial statements 92,005
Depreciation expense not included in fund finanacial statements 9,139
TOTAL FUND BALANCE, JUNE 30, 2018 1,991,907$
30
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
COUNTY EMPLOYEES RETIREMENT SYSTEM
JUNE 30, 2018
2018 2017 2016 2015
Bureau Group's proportion of the net
pension liability 0.01550% 0.01526% 0.01502% 0.01430%
Bureau Group's proportionate share of the net
pension liability 907,263$ 751,222$ 645,603$ 463,657$
Bureau Group's covered-employee payroll 351,912$ 377,385$ 363,809$ 350,334$
Bureau Group's proportionate share of the net
pension liability as a percentage of its
covered-employee payroll 257.8096% 199.0598% 177.4566% 132.3471%
Plan fiduciary net position as a
percentage of the total pension
liability 53.3249% 55.5028% 59.9684% 66.8010%
* The amounts presented for each fiscal year were determined as of 06/30 the previous year.
See accompanying notes 31
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
SCHEDULE OF PENSION CONTRIBUTIONS
COUNTY EMPLOYEES RETIREMENT SYSTEM
LAST FOUR FISCAL YEARS
2018 2017 2016 2015
Contractually required contribution 50,957$ 52,645$ 45,206$ 44,668$
Contributions in relation to the
contractually required contribution (50,957) (52,645) (45,206) (44,668)
Contribution deficiency (excess) -$ -$ -$ -$
Bureau Group's covered-employee payroll 351,912$ 377,385$ 363,809$ 350,334$
Contributions as a percentage of
covered-employee payroll 14.48% 13.95% 12.43% 12.75%
See accompanying notes 32
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET OPEB LIABILITY
COUNTY EMPLOYEES RETIREMENT SYSTEM
JUNE 30, 2018
2018
Bureau Group's proportion of the net
OPEB liability 0.01550%
Bureau Group's proportionate share of the net
OPEB liability 311,603$
Bureau Group's covered-employee payroll 351,912$
Bureau Group's proportionate share of the net
OPEB liability as a percentage of its
covered-employee payroll 88.5457%
Plan fiduciary net position as a
percentage of the total OPEB
liability 52.39%
* The amounts presented for each fiscal year were determined as of 06/30 the previous year.
See accompanying notes 33
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
SCHEDULE OF OPEB CONTRIBUTIONS
COUNTY EMPLOYEES RETIREMENT SYSTEM
LAST FOUR FISCAL YEARS
2018 2017 2016 2015
Contractually required contribution 16,540$ 17,850$ 16,888$ 17,236$
Contributions in relation to the
contractually required contribution (16,540) (17,850) (16,888) (17,236)
Contribution deficiency (excess) -$ -$ -$ -$
Bureau Group's covered-employee payroll 351,912$ 377,385$ 363,809$ 350,344$
Contributions as a percentage of
covered-employee payroll 4.70% 4.73% 4.64% 4.92%
See accompanying notes 34
35
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2018 There are no changes to benefit terms. However, the following changes in assumptions were adopted by the Board of Trustees for the County Employees Retirement System related to pension and reflected in the valuation performed as of June 30, 2017:
• The asset valuation method changed from 5 year smoothed market to 20% of the difference between the market value of assets and the expected actuarial value of assets is recognized.
• The discount rate used to measure the total pension liability at June 30, 2017 is 6.25%. The previous year it was 7.50%
• Assumed rates of retirement, withdrawal, and disability were updated to more accurately reflect experience. The actuarially determined contribution rates are determined on an annual basis with fiscal year ending 2018, determined as of July 1, 2017. The amortization period of the unfunded liability has been reset as of July 1, 2013 to a closed 30-year period. The following actuarial methods and assumptions were used to determine contribution rates reported:
Actuarial Cost Method Entry Age
Amortization Method Level of Percentage of Payroll, closed
Remaining Amortization Period 26 years
Asset Valuation Method 20% of the difference between the market value of assets and the expected actuarial value of assets is recognized
Inflation 3.25%
Salary Increase 4.0% average, including Inflation
Investment Rate of Return 7.50%, Net of Pension Plan Investment Expense, including Inflation
OTHER SUPPLEMENTARY INFORMATION
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
BALANCE SHEET - NONMAJOR FUNDS
Special
Athletic Sign
Projects Project Total
ASSETS
Cash and cash equivalents 3,470$ 2,115$ 5,585$
Investments - certificates of deposit - 9,839 9,839
TOTAL CURRENT ASSETS 3,470 11,954 15,424
TOTAL ASSETS 3,470$ 11,954$ 15,424$
FUND BALANCE
Assigned 3,470 11,954 15,424
Unreserved - - -
TOTAL FUND BALANCE 3,470 11,954 15,424
TOTAL LIABILITIES AND FUND BALANCES 3,470$ 11,954$ 15,424$
JUNE 30, 2018
36
BOWLING GREEN AREA CONVENTION & VISITORS BUREAU GROUP
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
NONMAJOR FUNDS
FOR THE YEAR ENDED JUNE 30, 2018
Special Total
Athletic Sign (Memorandum
Projects Project Only)
REVENUES
Interest income -$ 88$ 88$
Sponsorship - - -
TOTAL REVENUES - 88 88
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES - 88 88
OTHER FINANCING SOURCES (USES)
Transfers Out - - -
TOTAL OTHER FINANCING
SOURCES ( USES) - - -
NET CHANGE IN FUND BALANCE - 88 88
FUND BALANCE JULY 1, 2017 3,470 11,866 15,336
FUND BALANCE JUNE 30, 2018 3,470$ 11,954$ 15,424$
37
INFORMATION REQUIRED BY GOVERNMENT AUDITING STANDARDS
~t...~ Shelton CPAs, LLP www.sheltoncpas.com
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT
AUDITING STANDARDS
To the Bureau Members Bowling Green Area Convention & Visitors Bureau Group Bowling Green, Kentucky
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, financial statements of the governmental activities, the general fund, each major fund , and each the aggregate remaining fund information of the Bowling Green Area Convention & Visitors Bureau Group (the "Bureau Group") as of and for the year ended June 30,2018, and the related notes to the financial statements, which collectively comprise the Bureau Group's basic financial statements and have issued our report thereon dated November7, 2018.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Bureau Group's internal control over financial repotting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Bureau Group's internal control. Accordingly, we do not express an opinion on the effectiveness of Bureau Group's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Bureau Group's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results
181 West Professional Park Ct. Bowling Green, KY 42104 (270) 842-9620 Fax (270) 781-1911 [email protected]
of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of thi s report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity' s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Shelton CPAs, LLP Bowling Green, Kentucky November 7, 20 18